New vs Old Tax Regime 2025 | Budget 2025 Tax Updates & ITR Guide

New Tax Regime vs Old Tax Regime in 2025: Which One Should You Choose After Budget 2025?

Filing your ITR for AY 2025–26? One of the most common questions taxpayers face is whether to choose the New vs Old Tax Regime 2025. With Budget 2025 introducing major tax reliefs, this decision has become even more crucial.

🔹 What Changed in Budget 2025?

• Zero-tax threshold raised: From ₹7.5 lakh to ₹12.75 lakh under the new regime.

• Standard deduction increased: From ₹50,000 to ₹75,000 for salaried taxpayers.

• Simplified slabs: Reduced complexities in tax rates under the new regime.

• Extended filing window: You now have up to 3 years to revise your ITR.

Read more about the complete Budget 2025 tax updates, Budget 2025 Tax Highlights.

🔹 Income Tax Slabs for FY 2024–25 (AY 2025–26)

✅ New Tax Regime (Post Budget 2025)

• Up to ₹12.75 lakh → Nil tax

• ₹12.75–15 lakh → 10%

• Above ₹15 lakh → 20%

✅ Old Tax Regime (Unchanged)

• Up to ₹2.5 lakh → Nil tax

• ₹2.5–5 lakh → 5%

• ₹5–10 lakh → 20%

• Above ₹10 lakh → 30%

🔹 Pros & Cons

✅ New Regime

Pros:

• Higher exemption limit

• No need for complex deductions

• Better for salaried individuals without many investments

Cons:

• No deductions for 80C, 80D, HRA, LTA, etc.

• Limited benefits if you actively invest in tax-saving schemes

✅ Old Regime

Pros:

• Multiple deductions available (80C, 80D, 24(b), HRA, etc.)

• Beneficial for those with housing loans, insurance, PF, and ELSS investments

Cons:

• Higher tax rates without deductions

• More paperwork and planning required

Learn how to maximize deductions with our Tax-Saving Investments Guide.

🔹 Which One Should You Choose?

• If your income is below ₹12.75 lakh → New Regime is better (zero tax).

• If you don’t have major investments → New Regime is simpler and beneficial.

• If you have high deductions (₹3–4 lakh or more) → Old Regime may save more.

💡 Pro Tip: Use the Income Tax Department’s calculator or check our ITR filing AY 2025–26 ITR Filing Checklist 2025 to compare your tax liability under both regimes before filing.

🔹 FAQs

Q1. Can I switch regimes every year?
👉 Yes, salaried taxpayers can switch each year, but business owners/self-employed have restrictions.

Q2. Is the new regime now default?
👉 Yes, as per Budget 2025, the new regime is the default option. You need to opt-out if you want the old regime.

Q3. Does the old regime still exist?
👉 Yes, but the government is making the new regime more attractive.

Read more on common mistakes while filing ITR in our Top 7 ITR Filing Mistakes to Avoid blog.

🔹 Conclusion

Budget 2025 has tilted the balance in favour of the New Tax Regime with higher exemption and simplified slabs. However, if you actively invest in tax-saving schemes and claim deductions, the Old Regime might still work for you.

✅ The smart choice: Calculate both, compare, and then file.

Check how capital gains impact your tax with our Capital Gains Tax Explained for 2025 guide.

✍️ Written by Professional Duniya
💼 Helping individuals & businesses with tax, compliance & financial planning.

👉 Need assistance with ITR filing? Contact us today!